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Kitten
Kitten sold 20,000 £1 ordinary shares in Kat Ltd on 5 October 2015, which resulted in a chargeable gain of £142,200. This disposal qualified for entrepreneurs’ relief.
Kitten had originally subscribed for 90,000 shares in Kat Ltd on 7 July 2008 at their par value. On 22 September 2011, Kat Ltd made a 2 for 3 rights issue. Kitten took up her allocation under the rights issue in full, paying £6.40 for each new share issued.
Kitten also sold an antique vase on 16 January 2016, which resulted in a chargeable gain of £27,900.
For the tax year 2015-16, Kitten had taxable income of £12,000.
What cost figure will have been used in calculating the chargeable gain on Kitten’s disposal of 20,000 ordinary shares in Kat Ltd?£12,000
£63,200
£84,800
£20,000
ans
(90,000 + (90,000 x 2/3 x 6.40)) x 20,000/(90,000 + (90,000 x 2/3)) = £63,200It is questions like this that again make me tell you to go back and learn the basics! Who is entitled to indexation allowance?
Jean – I have said this many many times now – you need to go back to the notes and lectures. I will ask you again – have you worked through every lecture with the notes??
Individuals do NOT get Indexation Allowance!! You would not and should not be asking these questions if you had done the work I have asked you to doDear Tutor, Just looking at this question for my own revision – is the answer £20000 – the cost at par value? (Oldest purchase as dates aren’t close enough to use the rights issue costs)
No – you need to construct the share pool which will show the original acquisition of £90,000 for 90,000 shares and then add in the effect of the rights issue – another 60,000 shares at £6.40 per share
I suddenly realised that after I posted! Thank you for the clarification though!
I got an answer of £63200 once I used my brain!
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